Entrepreneurship

MNO2009 - Session 4
Person Factors & Self-Motivation
Prof. Dr. Sarah Cheah
 Recap of Session 3
Building a Founding Team

Relationships

CEO
Rewards Roles
 Readings
Building a Founding Team
Read
• Cisco Just Turned 30: This Is The Dramatic Story Of How The Founders Were
Ousted
http://www.businessinsider.sg/how-ciscos-founders-were-ousted-2014-
12/?r=US&IR=T#.VuVpJ6Mj-iA
• Xiaomi’s Phones Have Conquered China
http://mobile.businessweek.com/articles/2014-06-04/chinas-xiaomi-the-worlds-
fastest-growing-phone-maker
• Founder’s agreement
http://www.jfdi.asia/terms
https://www.docracy.com/6348/founders-agreement-template
• Cheah et al. (2017) Chapter 3, Starting the Venture, Facing Down Failure, 2 edition
(Pearson online coursepack)
Watch
• Hiring the Right Employees 1 and 2 by NUS Biz School Production
(IVLE/ Multimedia)
 Readings
Building a Founding Team
Read
• Jack Ma’s last speech as Alibaba CEO
https://www.techinasia.com/alibaba-jack-ma-last-ceo-speech/
• Jeff Bezos: We are what we choose
http://www.businessinsider.com/we-are-what-we-choose-2010-6?IR=T&r=US&IR=T
• Jack vs Jeff
https://www.techinasia.com/jack-ma-jeff-bezos-amazon-alibaba-billionaires-
ecommerce/
Optional Reading
• Bass, B. M. (2008). The Bass Handbook of Leadership: Theory. Research, and
Managerial Applicati ons. 4th.
• Meredith Belbin, R. (2011). Management teams: Why they succeed or fail. Human
Resource Management International Digest, 19(3).
• Zahra, S. A., Ireland, R. D., & Hitt, M. A. (2000). International expansion by new
venture firms: International diversity, mode of market entry, technological learning,
and performance. Academy of Management journal, 43(5), 925-950.
 Agenda

Self motivation and Personal Factors

Causation vs effectuation
Session 4:
Self-motivation &
Person Factors
 L1 to L6 Topics – Where are we?

L1: entrepreneur L2: entrepreneur makes plans L3: entrepreneur

identifies & evaluates and sets goals while finds co-founder(s)
opportunity developing target customers & builds team
1 2 3

L4: entrepreneur finds L5: entrepreneur persuades, L6: entrepreneur can

investors & mentors negotiates and networks to choose to build social
from ecosystem (e.g. engage prospective enterprise to help
incubator/ accelerator/ investors, employees, community or join a
clients & partners 5 6
coworking space) 4 corporation
 L1 to L6 Frameworks – Where are we?
1. Ardichvili’s model of 3. Babson’s framework of 5. Building a founding
opportunity startup ecosystem (6 team –Wasserman’s 3R
identification (4 domains) model (relationships,
factors) 4. Action planning process: roles & rewards)
2. Spinelli & Adam’s Lean startup approach
model of opportunity (customer development)
evaluation (5 criteria)
1 2 3

6. Self-motivation and 8. Watkin’s 4 principles of 11. ACSEP’s models of

personal factors: persuasion social entrepreneurship
Wasserman’s 9. Kolb’s negotiation 12. Wolcott and Lippitz’s
founders’ dilemma- approach models of corporate
rich vs king 10. Cross and Thomas’ model entrepreneurship
7. Saravasthy’s of building networks
causation vs
effectuation model 4 5 6
 Agenda

Self motivation and Personal Factors

Causation vs effectuation
Source: Wasserman
 Archipelago
online collaborative learning tool
• Step 1: Open email sent to you from arch-
noreply@archipelago.1.comp.nus.edu.sg this morning
• Step 2: Click on link “To Archipelago” in email
– Note this link is unique to you. Do NOT share your link.
• Step 3: In Archipelago environment, on left panel, click
on Activity 1 – you will see questions in main window
• Step 4: Key in your responses in Activity 1 main
window
• Step 5: when done, click “Submit Answer” on bottom
right of main window.
 Self-Motivation & Person Factors

Typical startups
• 1st round: Raise $3m, with a pre-money valuation of $5m.
• 2nd round: Raise $5.5m, with a valuation of $10m.
• 3rd round: Raise $7m, with a valuation of $15m.

Facebook
• 1st round: Raise $0.5m, with a pre-money valuation of $5m.
• 2nd round: Raise $12.7m, with a valuation of $100m.
• 3rd round: Raise $27.5m, with valuation of $525m.

Source: Wasserman
Self-Motivation & Person Factors
How to split equity pie

How much equity do investors deserve?

Source: Wasserman
Self-Motivation & Person Factors
Founders’ Dilemma - Rich vs King
(Case 1)

First financing

Investors,
40%

Founders,
60%

IPO in Feb 1990, mkt cap:

$224m, both had $190m
 Self-Motivation & Person Factors
Founders’ Dilemma - Rich vs King

Financial Gain

Well below potential Close to potential

Control Over Company
Little

Failure Rich
Complete

King Exception

Source: Wasserman
 The Trade-off Entrepreneurs Make
Founders’ choices are straightforward:
Do they want to be rich or king?
Few have been both
 Self-Motivation &
Person Factors
Founders’ Dilemma -
Rich vs King
(Case 2)

Source: Bloomberg.com
 Self-Motivation & Person Factors
Common Errors of Entrepreneurs

Product fully More keen to sell Offer discounts

developed before than listen to without conditions -
talking to customers customer feedback unsustainable

Sell to family and

Fail to seek strategic
friends – false sense
buyers
of validation

Source: Onyemah et al.

 Agenda

Self motivation and Personal Factors

Causation vs effectuation
 Causation vs Effectuation

Beware of
Start with goals Expected return Avoid surprise
competition

VS
Start with means Affordable loss Form partnership Leverage surprise
 Causation vs Effectuation

Goals given based on predictions

Beware of
Start with goals Expected return Avoid surprise
competition

VS
Start with means Affordable loss Form partnership Leverage surprise

Means for decisions & new opportunity

 Case study
NOX – Dining in the Dark, Singapore
 Causation vs Effectuation

Calculate upside potential & pursue opportunity

Beware of
Start with goals Expected return Avoid surprise
competition

VS
Start with means Affordable loss Form partnership Leverage surprise

Calculate downside potential & risk no more than you can afford to
lose
 Case study
Silly Putty, US

Source: www.imd.org, Sarasvathy, 2007

 Causation vs Effectuation
Set up transactional relationships with customers and
suppliers

Beware of
Start with goals Expected return Avoid surprise
competition

VS
Start with means Affordable loss Form partnership Leverage surprise

Build future with customers, suppliers & even competitors

 Case study
Partnership on Ice
Sculpting, Sweden

Source: www.imd.org, Sarasvathy, 2007

 Causation vs Effectuation

Focus on expected goal or outcome

Beware of
Start with goals Expected return Avoid surprise
competition

VS
Start with means Affordable loss Form partnership Leverage surprise

Surprises and even failures can represent new

opportunities
 Case study
Ice Hotel, Sweden

Source: www.imd.org, Sarasvathy, 2007

 Causation vs Effectuation

Causation: starts with desired outcome &

focuses on means to generate that outcome
Beware of
Start with goals Expected return Avoid surprise
competition

VS
Start with means Affordable loss Form partnership Leverage surprise

Effectuation: starts with what one has and

selects among possible outcomes
 Effectuation Approach
for entrepreneurs (In a nutshell)

Source: http://www.theafactor.org Source: Sarasvathy

 Archipelago
online collaborative learning tool
• Step 1: Open email sent to you from arch-
noreply@archipelago.1.comp.nus.edu.sg this morning
• Step 2: Click on link “To Archipelago” in email
– Note this link is unique to you. Do NOT share your link.
• Step 3: In Archipelago environment, on left panel, click
on Activity 2 – you will see questions in main window
• Step 4: Key in your responses in Activity 2 main
window
• Step 5: when done, click “Submit Answer” on bottom
right of main window.
 Summary

Self motivation and Personal

Causation VS effectuation
Factors

Start with means

Founders’
Dilemma
Affordable loss
Common Errors
Form partnership

Leverage Surprise
 Readings
Person Factors & Self-motivation

Read
• Sarasvathy, 2001, Causation and effectuation : toward a
theoretical shift from economic inevitability to entrepreneurial
contingency, Academy of Management Review. <IVLE e-
reserves> Also available:
http://entrepreneurscommunicate.pbworks.com/f/2001_Sarasva
thy_Causation+adn+effectuation.pdf
• Onyemah, Pesquera and Ali, 2013, What Entrepreneurs Get
Wrong by HBR http://hbr.org/2013/05/what-entrepreneurs-get-
wrong/ar/1
 Readings
Person Factors & Self-motivation

Optional Reference
• Wasserman, N. (2008). The founder’s dilemma. Harvard Business
Review, 86(2), 102-109.
• CISCO case: “Early days of Cisco Len Bosack & Sandy Lerner PT
2”, https://www.youtube.com/watch?v=16GJpLE2GlQ#t=15.522539
• “Bloomberg Game Changers - Sergey Brin & Larry Page Google Full
Story”, https://www.youtube.com/watch?v=YypPVcyysHc
• Dining in the dark, https://www.youtube.com/watch?v=o-ztexzaoMw
• Silly Putty, http://www.cbsnews.com/videos/accidental-inventions
• Ice hotel, https://www.icehotel.com/about-icehotel/interview-with-the-
founder-of-icehotel-yngve-bergqvist/;
https://www.youtube.com/watch?v=6MNu6b-1dJo&gl=SG&hl=en-GB
 Preparation for Tutorial 3
14 Sep 2017
Pre-tutorial activities:
1. Read Digify case (ICT/Securitytech) (Pearson online
coursepack)
2. Read Cheah et al. (2017) Chapter 3, Starting a Venture, pp.
75-82, Facing Down Failure, 2 edition (Pearson online
coursepack)
3. Review Lecture 3 notes
4. Watch Hiring the Right Employees 1 and 2 by NUS Biz
School Production (IVLE/ Multimedia)
 Preparation for Tutorial 3
14 Sep 2017
Please go through the readings and answer the following
questions:
1. Please evaluate the stability of the Digify team, using
Wasserman’s 3R model.
2. Digify is concerned with the two issues (softness of demand
and competition) highlighted at the end of the case. Knowing
that you are a BBA student who has taken MNO2009, Digify
would like to invite you to join them as their third partner to
contribute in the areas of your strength. What plans would
you propose for Digify? Justify why and how you think Digify
should compensate you as their third partner?
 About Individual Assignment Options
How to use Facing Down Failure (FDF) cases in
Pearson online coursepack

FDF Cases Industry Tutorial Assignment

Option
QLC ICT, Edtech 1 A, C, D
Healthcare
Tware 2 B, C, D
Medtech
Digify ICT, Securitytech 3 A, C, D
Vault Dragon Healthcare, EHRtech 4 A, C, D
InvitroCue Healthcare, biotech 5 B, C, D
I3 Precision Healthcare, Medtech B, C, D
Fashion
Her Velvet Vase C, D
e-commerce
One Rochester F&B, wedding event
C, D
Group management